March 31, 2011 (Shirley Allen)
CoreLogic released its Shadow Inventory Report for March 2011 which discloses that the current shadow inventory as of January 2011 declined to 1.8 million units, which is down slightly from the 2 million units that existed a year ago. Based on current sales projections however, the amount of units represents a nine months’ supply which is unchanged from a year ago.
Mark Fleming, chief economist for CoreLogic commented, “While the trend of the shadow inventory is improving somewhat, the current level and distressed months’ supply remain very high. The short-term weakness in prices and longer-term weakness in the drivers that affect the housing market imply that excess supply will remain high for an extended period of time.”
CoreLogic’s research suggests that although a portion of the shadow inventory would be excellent candidates for loan modifications and short sales, it would in all likelihood only be a small share of the total inventory.
The report states that of the current 1.8 million units in the shadow inventory, 870,000 units are seriously delinquent, 445,000 units are in some stage of foreclosure, and 470,000 units are already in REO.
CoreLogic predicts that nearly 2 million current negative equity loans that are more than 50 percent upside-down will eventually become part of the shadow supply in the near future.
The states with the most months’ supply of distressed properties where the ratio of 90 days or more of delinquent properties to the number of home sales are highest are New Jersey, Illinois, and Maryland. Corelogic says the driving force behind these states high ratio’s is a combination of higher than average 90+ day delinquencies and lower sales activity.
The states with the lowest ratio of distressed months’ supply are North Dakota, Alaska and Wyoming, all of which the report points out, were states where the boom/bust did not occur.
For the first time in its Shadow Inventory Report, CoreLogic looked into how loan modifications and short sales could reduce shadow inventory levels. The researchers concluded loan modifications and short sales could potentially reduce the shadow inventory supply by one-half by utilizing account optimal treatment methods, based on net present value calculations as well as expected severity and re-default rates. However, they also felt that low borrower response rates to lender outreach and high modification re-default rates made that possibility unlikely.
CoreLogic is a leading provider of consumer, financial and property information, analytics and services to business and government. To read the full report, click here.
Tags: CoreLogic, shadow inventory, sales projections, distressed supply, excess supply, negative equity loans, delinquent properties, loan modifications, short sales